Congress may trim its sails on overseas-bribery law

By
Peter Grier, Business correspondent of The Christian Science Monitor /
December 2, 1981

Washington

Congress has an unerring sense of what's fashionable in legislation. In 1977, with Watergate as an influence, the Moral Look was all the rage. One bill passed that year was the Foreign Corrupt Practices Act, designed to regulate the sometimes-rambunctious overseas behavior of United States corporations. ''How can you vote against a title like that?'' a Capitol Hill aide asks. Business has complained since the day the FCPA became law that it is too prim.

Now it's 1981. Let's face it, the trend is in the other direction. Not toward an abandonment of ethical standards, perhaps; but the Moral Look has been supplanted by Pragmatic Considerations. In the best of all possible worlds, we could legislate thus-and-so, but things being as they are, we must consider etc. , etc.

Is the 1977 act so strict that it inhibits foreign trade? Many congressmen think so, and they have set about amending the law. That's a hard thing to do, legislating morality. Governments tend to do it with the grace of a linebacker playing the harpsichord with his feet.

The FCPA was a direct response to disclosure by the Securities and Exchange Commission in the early '70s of more than 450 cases of overseas bribery. The bill created two restraints: overt antibribery provisions, and accounting laws that require corporations to keep more detailed records.

Thirty percent of exporters responding to a General Accounting Office survey last spring said they had lost business because of the legislation. The 63 members of the Emergency Committee for American Trade, all large multinationals, estimate the FCPA has lost them $2 billion.

Critics claim the act's accounting provisions are unclear and onerous. But they save the real brickbats for the antibribe law, which they say pins too much responsibility on corporate executives, requiring a type of moral omniscience.

A prime irritation is the clause that prohibits payments to overseas representatives if a company has ''reason to know'' the rep will turn around and bribe foreign officials.

Consider the fictional Amlox Company, which hires a resident of Nameria to sell its shower curtains. If the agent turns out to be a well-known bounder, famous for bribing anyone he can take to lunch, Amlox is liable for his actions - even though it didn't authorize them. Since the agent's reputation is bad, Amlox has ''reason to know'' such a thing will occur.

The Senate Banking Committee has been struggling with the problem all year: Are we asking too much of corporations? The corporations thought so. They wanted only directly authorized bribes to be illegal. A bill introduced in July by Sen. John H. Chafee (R) of Rhode Island would have replaced ''reason to know'' with ''directs or authorizes.''

The FCPA's backers said this phrase would gut the bill. Sen. William Proxmire (D) of Wisconsin, an author of the original legislation and not a shy person, said that ''if you like to see a law drawn, quartered, and butchered, (this change) will suit you fine.''

The committee then began the difficult process of negotiating where to draw the line of responsibility.

''Everything was hard because nobody wanted the compromise,'' says a congressional staff member who worked on the issue.

What shall we say? How can we word it so everyone's satisfied? Eventually, this traditional Dance of the Give-and-Take settled on a new phrase: Companies will be liable only for bribes authorized ''expressly or by course of conduct.'' In other words, what you don't know can't hurt you, but knowing winks are still illegal.

An amendment to this effect passed the Senate by voice vote last week. In addition, the accounting sections were clarified; sole enforcement powers against bribery were given to the Justice Department; and the FCPA's name was changed to the Business Practices and Records Act.

But the Senate didn't face up to all the hard choices needed to clarify the bill. The original act authorized ''grease payments'' - sums spent to ''expedite . . . routine governmental action,'' as opposed to actions where judgment is a factor. Grease payments are often necessary to speed up the unloading of perishable fruit, for instance.

The clause is a potential escape hatch for bribers. What does ''expedite'' mean? What is ''routine action''? If we're going to crack down on bribes, how can we justify making some, however small, legal?

The Senate reforms didn't substantially alter this clause.

''That section is not adequately handled,'' a Senate aide admits.

The consensus on the Hill is that the Senate decided to let the House handle ''grease payments.'' A House Energy and Commerce subcommittee has hearings scheduled for the middle of this month. But the chairman, Rep. Timothy E. Wirth (D) of Colorado, has made noises as if he isn't too sure any changes at all need to be made in the FCPA.

''We are taking a different approach,'' a spokesman for Representative Wirth says. ''The Senate bill was passed on what people say happens. We want to find out what really happens.''